He was the second son of Vincenzo Gonzaga, Duke of Guastalla and Maria Vittoria Gonzaga, and was mentally handicapped.
When his elder brother Duke Antonio Ferrante died in an accident in 1729, Giuseppe was the only remaining male member of the Gonzaga family, so he became Duke.

Giuseppe would probably never have married, but when he became Duke a marriage was arranged in 1731 with the sixteen year-old Eleonore von Holstein (1715–1760), daughter of Duke Leopold of Schleswig-Holstein-Sonderburg-Wiesenburg. The marriage remained childless.